Waiting for better times: Dividend optimisation with a negative preference rate
A talk in the Mathematical finance / Insurance mathematics series by
Leonie Brinker from Universität zu Köln
| Abstract: | How and when to pay out dividends is a crucial question for many companies. In stochastic control theory, this question can be modelled as the problem of choosing a càdlàg, adapted process D (representing the accumulated dividend payments) which maximises the expected discounted value of dividends up to the time when the post-dividend surplus becomes negative. Often the discounting function is modelled in such a way that money 'today' is preferred to money 'tomorrow'. However, these preferences can change over time and are subject to various exogenous and endogenous factors, such as changes in management, the influence of (im-)patient investors, regulatory requirements and market crashes. In this talk, we consider an extension of the dividend maximisation problem for an insurance company by allowing switches between a positive and a negative time preference rate. The negative preference reflects the `tendency to wait' many companies show in times of uncertainty. We model the surplus by a Brownian risk process and the preference rate by a two-state Markov chain. We solve the problem of finding the optimal dividend payout strategy for the setting with a classical ruin concept as well as for the case of Parisian ruin with an exponential delay. The talk is based on joint work with Julia Eisenberg (TU Vienna). Within the CRC this talk is associated to the project(s): C4 |